Oil gains more than almost 5% in the past two days to ignore API and EIA inventory reports. On Tuesday, the American Petroleum Institute reported a 4.520M inventory increase in the past week, while the market was expecting just a 0.200M increase. And later on, Wednesday, the Energy Information Administration’s (EIA) Crude Oil Inventories reported a 2.588M increase in the number of barrels of commercial crude oil held by US firms. However, market participants ignored these reports, and oil prices increased, as optimism over record US crude exports and signs that with less hawkish policies by central banks recession fears are abating outweighed concern over slack demand in China.
Better to wait for the Fed meeting at the beginning of November.
Last week US President Joe Biden announced another 15 million barrels of sales from the US Strategic Petroleum Reserves, as the latest tranche of the 180-million-barrel program. This sale helped the US oil export to reach a record high. As export increased, investors read that as a hopeful sign of increasing demand. At the same time, with less hawkish signals from the Reserve Bank of Australia, Bank of Canada, and European Central Bank, speculation that central banks could be nearing the end helped the market sentiment.
Besides this news, in Early October OPEC decided on a massive output cut of 2 million BPD starting in November, which is the largest reduction since 2020 in a bid to raise prices, led by Saudi Arabia and Russia, and it is going to start in a few days. Although this decision’s real effect is just 500 bpd, as many members were not able to produce their quota before, it still means that members are following the market changes closely and can have a more severe reaction if it will be needed.
For now, market sentiment is positive, however, it cannot go future too fast, as most investors are waiting for the Federal Reserve Open Market Committee meeting on 1-2 November. From the technical point of view also while the price moves above 20 DMA, still bulls do have not enough power, and the trend mostly remains soft and natural. Neither technically nor fundamentally we have not enough signal for now to predict the following price action and it is better to wait for the Fed meeting at the beginning of November.